Kaiser Permanente Hawaii intends to raise rates next year for its most popular health insurance plan by an average of 8.7 percent because of rising health-care costs and to pay for new investment in its system.

Hawai'i's second-largest health insurer and No. 1 health maintenance organization said yesterday that the rates would take effect Jan. 1 and affect about 57,000 small-group members, businesses with fewer than 100 employees that are Kaiser members.

Kaiser's rate hike comes as other Hawai'i insurers have also struggled with higher medical costs because of rising prescription drug costs and increased member utilization. The state's largest medical insurer, the Hawaii Medical Service Association, raised its small-business rates an average of 8.5 percent in July after posting a $49 million operating loss last year.

"Unfortunately, the rising cost of providing quality health care, combined with our need to continually invest in our medical care program to benefit our members, has resulted in the need for this rate adjustment," said Bruce Behnke, president and general manager of Kaiser Permanente Hawaii.

Kaiser announced plans earlier this month to spend $200 million on construction and renovation during the next five years, citing a membership that has grown by 40,000 over the past decade to more than 225,000 members.

The average monthly premium next year for small businesses will be about $205 for a single person and about $615 for a family, health plan officials said. The plan includes medical, drug, vision and dental coverage.

"Although employers are required by law to purchase only medical coverage, most elect to add drug, vision and dental coverage as added employee benefits," said Claudia Schmidt, Kaiser's vice president of business development.

Schmidt added that the 8.7 percent increase was an average and that each employer group will see a different increase.

Hawai'i state law requires businesses to pay the larger part of health-care premiums for employees who work more than 20 hours a week. Rate changes for employees at bigger businesses will vary, based on their company's health-care experience, Kaiser said.

Behnke said Kaiser not only provides insurance, but also the medical care for its members.

"That means we pay for not only the cost of the medical care and service, but we also have a responsibility to invest in our medical care program so that our members receive the best quality care and service available," Behnke said.

He said in-patient care costs have been rising because only the most seriously ill people are being hospitalized. Complying with regulatory and legislative requirements have also contributed to the increased cost of medical care.

Kaiser's 2001 rates averaged 4 percent higher than last year, and rates rose an average of 3 percent in 2000.